The Bundled Payment Initiative and the Healthcare Compliance Industry

The Bundled Payment Initiative and the Healthcare Compliance Industry

Seven billion is an astronomical number, one that we humans simply cannot wrap our minds around. If you were to go back in time 7 billion seconds, it would be 1789, “the year George Washington was inaugurated as the first U.S. president and Congress met for the very first time.”  If all 7 billion plus humans on earth were stacked one on top of the other, we could make the distance to the moon and back about 14 times.

$7 billion is also the cost of joint replacements surgeries billed to Medicare each year. That’s right $7 with a B for billion.

This high cost of services charged to Medicare – $7 billion! – is clearly an enormous issue, one the Center for Medicare & Medicaid Services (CMS) is attempting to remedy by targeting hip and knee replacement surgeries with a new compulsory Medicare payment reform pilot which began April 1 known as the Bundled Payment for Care Improvement (BPCI).

What is the goal of the BPCI?  

The goal of the BPCI is to increase the possibility of higher quality and coordinated care while reducing Medicare expenditures – which CMS projects could save the Medicare program $343 million over the course of five years. In the traditional model of Medicare, payment is made to providers for each service furnished, called fee-for-service (FFS). According to the Center for Medicare and Medicaid Innovation (Innovation Center), the FFS payment model “rewards the quantity of services offered by providers rather than the quality of care furnished.”  

What are the logistics of the BPCI?

As an alternative, the BPCI initiative will package together the cost of multiple services received by an individual beneficiary. The bundled payment will be prospectively determined, encompassing all services furnished by the healthcare organization during an episode of care. When a service is complete, the provider will submit their claims to Medicare and then will be paid out of the bundled payment allotted to that particular healthcare organization. The Innovation Center believes packaging the payment of related services will necessitate more coordinated care, resulting in the avoidance of unnecessary services and, ultimately, the improvement of patient care. Furthermore, CMS financially incentivized the BPCI initiative by allowing the participating organizations to keep up to 50 percent of the savings garnered from cutting the cost of services furnished.

How does this impact the healthcare compliance industry?

Lowering the expenditures of Medicare through bundled payment and reducing redundancy and unnecessary services through coordinated patient care are important solutions offered by the BPCI initiative.

From a compliance perspective, however, there are potential concerns. Does the cutting of cost to Medicare payment come at the expense of quality healthcare? According to Melanie Evans at Modern Healthcare, there are significant differences between the bundled payment average determined by CMS compared to the market average of joint replacement surgeries in many regions. As a result, providers could face serious losses, especially for patients who require complex, high-cost services. These potential losses combined with the financial incentives of the new initiative may unintentionally lend themselves to the possibility of healthcare fraud and abuse; in an attempt to avoid these potential losses and reap the rewards of gainsharing, providers may delay needed care or choose the cheapest alternative in order to reduce costs.

CMS is aware of these possibilities and is actively measuring the quality of care during these trial runs, including making incentive payments only where quality is met. The BPCI is a sincere solution to significant issues and is already receiving healthy interest. Whether it will fix the problem of high expenditure while simultaneously increasing the quality of care, only time will tell.


In summary, CMS and the OIG are both tasked with helping to avoid fraud, waste and abuse. Sometimes this is through policy for reimbursement and other times it is through enforcement. The OIG is the ultimate enforcer for fraud and abuse and takes False Claims and overbilling seriously. They also will not tolerate a company billing or a company seeking reimbursement for excluded individuals or entities.

Written by: Joey Convertino

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